ENGROSSED
COMMITTEE SUBSTITUTE
FOR
Senate Bill No. 418
(By Senators Tomblin, Mr. President, and Sprouse,
By Request of the Executive)
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[Originating in the Committee on Finance;
reported March 21, 2005.]
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A BILL to amend and reenact §33-2-16 and §33-2-17 of the Code of
West Virginia, 1931, as amended; to amend said code by adding
thereto a new section, designated §33-11-4a; to amend and
reenact §33-11-6 of said code; and to amend said code by
adding thereto a new section, designated §33-20-4a, all
relating generally to the regulation of insurance; providing
that the Director of Consumer Advocacy shall be appointed by
the Governor; expanding the authority of the Office of
Consumer Advocacy; eliminating a cause of action for unfair
claims settlement practices by third parties; establishing
procedures for the filing, investigation and processing of
administrative complaints by third-party claimants; providing
for penalties for engaging in unfair claims settlement practices; and establishing that certain insurers shall submit
rate filings biannually.
Be it enacted by the Legislature of West Virginia:
That §33-2-16 and §33-2-17 of the Code of West Virginia, 1931,
as amended, be amended and reenacted; that said code be amended by
adding thereto a new section, designated §33-11-4a; that §33-11-6
of said code be amended and reenacted; and that said code be
amended by adding thereto a new section, designated §33-20-4a, all
to read as follows:
ARTICLE 2. INSURANCE COMMISSIONER.
§33-2-16. Office of consumer advocacy established; director of
consumer advocacy; promulgation of rules and
regulations.
(a) There is hereby created within the agency of the Insurance
Commissioner the Office of Consumer Advocacy. The
position of
Director of the Office of Consumer Advocacy
shall be is a full-time
position.
and The Director shall be appointed by the
commissioner
Governor for a term of four years
to coincide with the term of the
Governor and may be discharged only for failure to carry out the
duties of the office or for other good and sufficient cause:
Provided, That the current Director of the Office of Consumer
Advocacy or other appointee of the Commissioner shall continue in
the position until the Governor appoints a new Director.
(b) The Insurance Commissioner shall provide office space,
equipment and supplies for the office.
(c) The Director
shall may promulgate rules pursuant to
article three, chapter twenty-nine-a of this code in order to
effect the purposes of this section and sections seventeen and
section eighteen of this article.
(d) On or before the first day of each regular session of the
Legislature, the Director shall file with the Governor, the Clerk
of the Senate and the Clerk of the House of Delegates a report
detailing the actions taken by the division in the preceding
calendar year.
§33-2-17. Authority of Office of Consumer Advocacy; retroactive
effect of authority prohibited.
(a) In addition to the authority established under the rules
promulgated by the Director, the Office of Consumer Advocacy is
authorized to:
(1) Institute, intervene in or otherwise participate in, as an
advocate for the public interest and the interests of insurance
consumers, proceedings in state and federal courts, before
administrative agencies, or before the Health Care Cost Review
Authority, concerning applications or proceedings before the Health
Care Cost Review Authority or the review of any act, failure to act
or order of the Health Care Cost Review Authority;
(2) At the request of one or more policyholders, or whenever
the public interest is served, to advocate the interests of those
policyholders in proceedings arising out of any filing made with
the Insurance Commissioner by any insurance company or relating to
any complaint alleging an unfair or deceptive act or practice in the business of insurance;
(3) Institute, intervene in or otherwise participate in, as an
advocate for the public interest and the interests of insurance
consumers, proceedings in state and federal courts, before
administrative agencies, or before the Insurance Commissioner,
concerning applications or proceedings before the Commissioner or
the review of any act, failure to act or order of the Insurance
Commissioner;
(4) Review and compile information, data and studies of the
reasonable and customary rate schedules of health care providers
and health insurers for the purposes of reviewing, establishing,
investigating, or supporting any policy regarding health care
insurance rates;
(5) Exercise all the same rights and powers regarding
examination and cross-examination of witnesses, presentation of
evidence, rights of appeal and other matters as any party in
interest appearing before the Insurance Commissioner or the Health
Care Cost Review Authority;
(6) Hire consultants, experts, lawyers, actuaries, economists,
statisticians, accountants, clerks, stenographers, support staff,
assistants and other personnel necessary to carry out the
provisions of this section and sections sixteen and eighteen of
this article, which personnel shall be paid from special revenue
funds appropriated for the use of the office;
(7) Contract for the services of technically qualified persons
in the area of insurance matters to assist in the preparation and presentation of matters before the courts, the Insurance
Commissioner, administrative agencies or the Health Care Cost
Review Authority, which persons shall be paid from special revenue
funds appropriated for the use of the office;
(8) Make recommendations to the Legislature concerning
legislation to assist the office in the performance of its duties;
(9) Communicate and exchange data and information with other
federal or state agencies, divisions, departments, or officers and
with other interested parties, including, but not limited to,
health care providers, insurance companies, consumers or other
interested parties; and
(10) Perform other duties to effect the purposes of the
office.
(b) The provisions of this section do not apply to any filing
made by an insurance company, or act or order performed or issued
by the Commissioner, or complaint filed by a policyholder with the
Commissioner prior to the thirtieth day of June, one thousand nine
hundred ninety-one. All proceedings and orders in connection with
these prior matters shall be governed by the law in effect at the
time of the filing, or performance or issuance of the act or order.
(c) The scope of authority granted under this section and
section sixteen of this article is restricted to matters related to
health care costs and health insurance policies, subscriber
contracts issued by organizations under article twenty-four of this
chapter, health care corporations under article twenty-five of this
chapter, health maintenance organizations under article twenty-five-a of this chapter, contracts supplemental to health
insurance policies, and other matters related to health insurance
issues identified by rules of the commissioner promulgated under
section one of this article and chapter twenty-nine-a of this code.
ARTICLE 11. UNFAIR TRADE PRACTICES.
§33-11-4a. Complaints by third-party claimants; elimination of
private cause of action.
(a) A third-party claimant may not bring a private cause of
action or any other action against any person for an unfair claims
settlement practice, except as otherwise set forth in this section.
A third-party claimant's sole remedy against a person for an unfair
claims settlement practice or the bad faith settlement of a claim
is the filing of an administrative complaint with the Commissioner
in accordance with subsection (b) of this section.
(b) A third-party claimant may file an administrative
complaint against a person for an alleged unfair claims settlement
practice with the Commissioner. The administrative complaint shall
be filed as soon as practicable but in no event later than one year
following the actual or implied discovery of the alleged unfair
claims settlement practice.
(1) The administrative complaint shall be on a form provided
by the Commissioner and shall state with specificity the following
information and such other information as the Commissioner may
require:
(A) The statutory provision, if known, which the person
allegedly violated;
(B) The facts and circumstances giving rise to the violation;
(C) The name of any individual or other entity involved in the
violation; and
(D) Reference to specific policy language that is relevant to
the violation, if known.
(2) If the administrative complaint is deficient, the
Commissioner shall contact the third-party claimant within fifteen
days of receipt of the complaint to obtain the necessary
information.
(3) Upon receipt of a sufficiently complete administrative
complaint, the Commissioner must provide the person against whom
the administrative complaint is filed written notice of the alleged
violation.
(4) If the person against whom the administrative complaint
was filed substantially corrects the circumstances giving rise to
the violation within sixty days after receiving the notice from the
Commissioner pursuant to subdivision (3) of this subsection, the
Commissioner shall close the complaint and no further action shall
lie on the matter, either by the Commissioner or by the third
party.
(5) The person that is the recipient of a notice from the
Commissioner pursuant to subdivision (3) of this subsection shall report to the Commissioner on the disposition of the alleged
violation within fifteen days of the disposition but no later than
sixty days from receipt of notice of the complaint from the
Commissioner.
(6) If the third-party claim is not resolved within the sixty-
day period described in subdivision (4) of this subsection through
either the person's substantial correction of the circumstances
giving rise to the alleged violation or an offer from the person to
resolve the administrative complaint that is found to be reasonable
by the Commissioner, the Commissioner shall conduct any
investigation he or she considers necessary to determine whether
the allegations contained in the administrative complaint are
meritorious. In the event that the Commissioner finds that the
allegations contained in the administrative complaint are
meritorious, after providing the person with a right to a hearing,
the Commissioner may proceed, in his or her discretion, to take any
administrative action he or she considers appropriate in accordance
with section six of this article or as otherwise set forth in this
chapter.
(7) If the Commissioner finds the administrative complaint to
be meritorious, the Commissioner, in his or her discretion, may
conduct a further investigation to determine if the person has
committed an unfair claims settlement practice with such frequency
as to constitute a general business practice. The Commissioner shall only proceed if a determination is made by the Commissioner
pursuant to this subsection that the complaint is meritorious. If
the Commissioner finds that the person has committed the unfair
claim settlement practice with such frequency as to constitute a
general business practice, the Commissioner may proceed to take
administrative action he or she considers appropriate in accordance
with section six of this article or as otherwise provided in this
chapter. The person is entitled to notice and hearing in
connection with the administrative proceeding, which may be
combined with the notice and hearing provided in subdivision (6) of
this subsection.
(c) A finding by the Commissioner that the actions of a person
constitute a general business practice may only be based on the
existence of substantially similar violations in a number of
separate claims or causes of action.
(d) A good faith disagreement over the value of an action or
claim or the liability of any party to any action or claim is not
an unfair claims settlement practice.
(e) A third-party claimant may not include allegations of
unfair claims settlement practices in his or her underlying
litigation against an insurer.
(f) The Commissioner, pursuant to article three, chapter
twenty-nine-a of this code, may promulgate by emergency rule
standards for subsection (9), section four of this article.
(g) Nothing in this section in any way limits the rights of
the Commissioner to investigate and take action against a person
which the Commissioner has reason to believe has committed an
unfair claims settlement practice or has consistently resolved
administrative complaints by third-party claimants within the
sixty-day period set forth in subdivision (4), subsection (b) of
this section.
(h) Definitions:
(1) "Third-party claimant" means any individual, corporation,
association, partnership or any other legal entity asserting a
claim against any individual, corporation, association, partnership
or other legal entity insured under an insurance policy or
insurance contract for the claim in question.
(2) "Unfair claims settlement practice" means a violation of
subsection (9), section four of this article.
(3) "Underlying litigation" means a third-party claimant's
lawsuit involving a claim against an insured.
(4) "Underlying claim" means the claim by a third-party
claimant against an insured.
§33-11-6. Violations, cease and desist and penalty orders and
modifications thereof.
If, after notice and hearing, the Commissioner determines that
any person has engaged in or is engaging in any method of
competition, act or practice in violation of the provisions of this article or any rules or regulations promulgated by the Commissioner
thereunder, the Commissioner shall issue an order directing
such
the person to cease and desist from engaging in
such the method of
competition, act or practice and, in addition thereto, the
Commissioner may at his
or her discretion order any one or more of
the following:
(a) Require the payment to the State of West Virginia of a
penalty in a sum not exceeding one thousand dollars for each and
every act or violation, but not to exceed an aggregate penalty of
ten thousand dollars, unless the person knew or reasonably should
have known he
or she was in violation of this article, in which
case the penalty shall
be not
more than exceed five thousand
dollars for each and every act or violation, but not to exceed an
aggregate penalty of
fifty one hundred thousand dollars in any six-
month period.
(b) In the event the act involves an intentional violation of
subdivision (9), section four of this article, and even though it
has not been established that the person engaged in a general
business practice, require the payment to the State of West
Virginia of a penalty in a sum not to exceed ten thousand dollars.
(c) Require the payment to the State of West Virginia of a
penalty in a sum not exceeding two hundred fifty thousand dollars
if the Commissioner finds that the insurer committed or performed
unfair claims settlement practices with such frequency as to indicate a general business practice.
(b) (d) Revoke or suspend the license of
such any person if he
or she knew, or reasonably should have known, that he
or she was in
violation of this article.
(e) Any person aggrieved by an order of the Commission under
this article may seek judicial review of the order as provided in
section fourteen, article two of this chapter.
(c) (f) No order of the Commissioner pursuant to this article
or order of
any court to enforce it, or holding of a hearing, shall
in any manner relieve or absolve any person affected by
such the
order or hearing from any other liability, penalty or forfeiture
under law.
ARTICLE 20. RATES AND RATING ORGANIZATIONS.
§33-20-4a. Biannual rate filings for certain insurance lines.
On or before the first day of July, two thousand five, the
Commissioner shall promulgate legislative rules pursuant to article
three, chapter twenty-nine-a of this code establishing procedures
whereby each insurer providing five percent or more of insurance
coverage in this state for private passenger automobile insurance
and property insurance obtained for personal or family needs shall
biannually submit rate filings required under this section:
Provided, That the requirements under this subsection shall
terminate on the first day of July, two thousand nine.